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publication February 24, 2022

Fiscal Decentralization in Croatia


A new World Bank report "Fiscal Decentralization in Croatia" assesses domestic political and institutional arrangements against international trends and recommends possible reform options for Croatia’s fiscal decentralization. The report’s areas of focus include: the vertical structure of government; expenditure responsibilities; taxation and revenue; intergovernmental transfers; borrowing and debt; and asset management.

As a centralized country with significant administrative fragmentation, Croatia has been making continuous efforts toward fiscal decentralization. The country’s current administrative structure has had divergent effects on local and regional financing, as well as on the efficient delivery of local public goods and services. The COVID-19 pandemic has exacerbated the disparities between levels of government, tightening revenue streams for many local and regional government units. Despite these challenges, Croatia is striving to achieve self-sustainable local and regional government, able to provide citizens with a robust set of high-quality public goods and services.

A renewed focus on fiscal decentralization and subnational government empowerment could lead to more balanced regional development, increased representation, improvement in the quality of local goods and services, and, consequently, greater confidence in and satisfaction with public administration.

Within this context, the new report Fiscal Decentralization in Croatia highlights the best international practices, experiences, and trends from the OECD and European Union member countries. These international examples serve as a foundation for developing options for reform in Croatia, which may in turn yield improved socioeconomic impacts for local and regional communities. Based on international review and cross-country comparison while also considering local economic, social, and political contexts, the report proposes some meaningful reform options. All of these options for reform support the main priorities and reforms outlined in Croatia’s National Recovery and Resilience Plan (NRRP).

This report can serve as a vehicle for greater collaboration in addressing the challenges of Croatia’s fiscal decentralization system and creating opportunities for reforms in support of fiscal decentralization and more effective financing of subnational governments.

The report is also available in Croatian.